📚 Learning Guide
Calculating Deadweight Loss
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Price controls in a market are to deadweight loss as a traffic jam is to what?

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Learning Path
Learning Path

Question & Answer
1
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2
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3
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4
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Choose the Best Answer

A

Smooth driving

B

Increased travel time

C

Reduced vehicle emissions

D

Efficient road use

Understanding the Answer

Let's break down why this is correct

Answer

Price controls in a market, like price ceilings or floors, often lead to deadweight loss because they prevent the market from reaching an efficient level of supply and demand. Similarly, a traffic jam occurs when too many cars try to use a road at the same time, which leads to slower speeds and less efficient travel. Just as deadweight loss represents lost economic efficiency due to price controls, a traffic jam represents lost time and productivity for drivers. For example, if a highway is designed for 100 cars but 200 cars are trying to use it, many drivers will spend more time stuck in traffic instead of reaching their destination quickly. Both situations show how restrictions—whether on prices or road space—can lead to a loss of efficiency.

Detailed Explanation

A traffic jam slows down cars, just like price controls slow down trade. Other options are incorrect because Smooth driving means everything is going well; Reduced emissions suggest less pollution, which is good.

Key Concepts

Deadweight Loss
Market Efficiency
Government Intervention
Topic

Calculating Deadweight Loss

Difficulty

medium level question

Cognitive Level

understand

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